Monthly Income Calculation

[eap82]

Still trying to get a plan nailed down. My trustee wants more from my payment and wanted a few more months worth of pay stubs from my new job. I spoke to the paralegal and they are averaging my monthly income over all my pay stubs, unfortunately with this job I get paid every two weeks and got three paychecks in October. This means that for two months out of the year I get paid three times. What is happening is my actual monthly pay is like $600 less than the averaged number they want to use. So for ten months out of the year I'm short and two months I'm over the income they want to claim on my forms. There isn't a lot of wiggle room in my budget so that shortage every month is a big deal. What do I do? Is there any other option than to just average out the income to one number? Maybe the two months I get three paychecks I can just pay more? I really don't know how I'm going to make this work. Surely someone else has run into this issue!

[justbroke]

The calculation of your "current monthly income" (CMI) is done by taking the last 6 months of pay, adding it together and then dividing by 6. This will cover the periods where you should have received 3 paychecks in 1 month.

Unfortunately, this is just how it works for people that are paid bi-weekly. Instead of either 52 checks a year (for weekly paid employees), 24 checks for semi-monthly, or 12 checks for monthly payroll, you are at 54 weeks. That 54 weeks is the oddball and must be accounted for.

So if you make $100 per pay period and you have (usually) two pays per month, it looks like you only make $200/month (or $2,400/year). But that's not the case. A person that makes $100/week actually makes 4.33 times that amount per month (approximately). In other words, $100/week is $433/month. We can check the math by multiplying $100 * 52 and then dividing by 12. Sometimes we think it's $100/week * 4 = $400/month, but that's not the case.

The calculation of your current monthly income (CMI) should be your weekly pay over 6 months added together, and then divided by 6. Yes, it will cause you to pay a little more in most months. The only way around this is to ask for bi-weekly payments, since monthly payments may cause an undue burden on you. That is the only way I know to address the 54 payments per year issue!

(Please note that the Trustee may be talking about the "monthly" amount, but you should probably be on a bi-weekly payment plan.)

[Zombie13]

Yes, we were in that same boat for 2+ years: biweekly payments, with a monthly bk payment.
During the negotiation phase, we collected evidence and proof of medical necessities, fought Tooth And Nail for every half-pence.
When the dust settled, and we got what we called the 'bonus check' every 6 months, we used that paycheck to catch up on expenses, such as annual, or semi-annual home maintenance, and bills... and, dare I say it... <gasp!> minor luxuries such as a yoga/barre set of classes.
Find ways to cut costs, find deals, grocery clearance bins, etc. to help.
Additionally - consider, after your plan is confirmed - look for a better job. Our attitude towards this was: "you wanna take our money? Fine... our challenge is to make more money". And *we* did. But I got laid off beforehand but that's another story. And of course the trustee raised the payment but we said again, fine... bring it on, we got 5 years bruh. So, over 5 years, we made money on the side, and reported every half-pence to the IRS.

Long story short - yes, we have been in the same scenario, and it was more difficult. But - spend time thinking, and discussing, how you can save money on expenses, and earn money as well. What are they gonna do? Only thing they can do, is raise the payment, and only if your income increases *sustainably* over 10% approximately.

[flashoflight]

Year 1 is pretty tight for bi-weeklies waiting for the 3 paycheck month. It is what it is. It gets better if you get a raise after confirmation and if the trustee doesn't try to go after your raise every year.

[eap82]

justbroke Thanks, I will ask about a biweekly payment program option if there is one!

Thanks everyone for your help, hopefully I can get this wrapped up soon.

[justbroke]

The only gotcha with bi-weekly payment is that you usually must start them right up front... that is 2-weeks from the date that you filed and every 2-weeks thereafter. In fact, if you are paid bi-weekly and you have a wage-deduction order on your pay, then the company would take up 1/26th of the annualized payment every 2-weeks. Most companies then send that payment monthly to the Trustee.

It's certainly something to discuss with your attorney.